After denying there was any problem, Nearmap (NEA ASX) has now been locked out of 65% of its U.S. sales by an ironclad patent challenge. After paying heavy damages, Nearmap is unlikely ever to be profitable in the U.S. It will mean losing 39% of total revenue and all of the company’s growth. If Nearmap survives, it will return to the small Australian market, where it is losing share.
When the news of the lawsuit broke, Nearmap said “The business remains unaffected.” The market begs to differ: share price fell by nearly 25%. Australian regulators had halted the stock as soon as we issued our February 10 report warning that this would happen, allowing the company to publish a non-response and push up the stock when the market re-opened. Investors lost out. Insiders won: Non-Executive Chairman Peter James made another AUD$809,497 from selling shares on March 15.
Nearmap upgraded profit guidance after closing on May 4, and shares rose 15% the next day, before the news broke. EagleView filed its case sometime during the U.S. day on May 4, 2021. Why didn't management request a trading halt before the open at 10 am in Sydney? Six million shares traded before the halt.